Republicans aim to assemble ‘mega-bill’ before July 4

House Republicans began work on the actual legislative text of the one bill in which they hope to enact most of their economic policy priorities for this Congress.

The drafting keeps Congressional leadership and the White House on track to meet a new, self-imposed July 4 deadline that they publicly announced on April 28. But whether the Senate, which adopted a different set of drafting instructions for the “mega-bill,” will accept all the cuts outlined by House committees remains to be seen.

House Committees for Armed Services, Financial Services, Judiciary, Transportation and Infrastructure, and Education and Workforce, Oversight and Government Reform, and Homeland Security debated and advanced their portions of the massive tax and fiscal package the week of April 28. But significant questions remain over the majority of spending cuts (or revenue increases) that the House is meant to deliver in order to set the table for $4.5 trillion worth of tax policy.  

Deadlines may slip as details remain to be ironed out, but as of May 1 the Ways and Means Committee is reportedly eyeing a mid-May markup of its significant section of the bill, though that could slip as questions remain over how other committees plan to reach agreement over the savings goals outlined in the House budget instructions. Regardless of whether their exact date slips, Ways and Means Committee Chair Jason Smith, R-Mo., affirmed, “we’re days away, not months,” to seeing bill text and legislation advancing.

While the House and Senate passed the same budget resolution, they took the unusual step of not compromising on the committee instructions set forth in their prior budget blueprints, meaning none of the differences between House and Senate visions have been formally resolved, a major hurdle remaining in the process.

House and Senate Republican leadership hope to use the debt limit ꟷ which this bill currently aims to increase ꟷ as a forcing mechanism to increase leverage with rank-and-file members. While the Treasury Department has yet to issue a formal ‘X date’ for when the federal government will breach its current borrowing threshold, the Congressional Budget Office estimates that will occur in August or September. The date is a moving target as the government just wrapped its busy season for tax collection and could occur earlier than that; if it does, that could again disrupt the timeline Republicans are working under. If the July 4 deadline slips, Sept. 30, when the current fiscal year ends, and Dec. 31, when TCJA rates and other major tax increases would occur without action, will be firm deadlines for Republicans to meet due to procedural and political reasons, respectively.

Here’s an overview of many of the other moving pieces in the sweeping economic and political effort. 

Trump, House speaker shoot down millionaires tax hike

President Donald Trump and House Speaker Mike Johnson, R-La., threw cold water on the idea of raising the top rate or adding a surtax for millionaires, though some Trump allies continue to push the policy.

"I think it would be very disruptive, because a lot of the millionaires would leave the country," Trump told reporters on April 23. "The old days, they left states. They go from one state to the other. Now with transportation so quick and so easy, they leave countries."

Johnson came out against the idea of a millionaire tax hike even more strongly in an April 23 Fox News appearance.

“We have been working against that idea," Johnson said. "I'm not in favor of raising the tax rates because our party is the group that stands against that, traditionally.” House Majority Leader Steve Scalise, R-La., has also come out against raising taxes on high-earners.

A higher nominal or effective rate of 39.6% or even 40% for millionaires appears unlikely to happen in the Republican bill, though congressional tax writers refuse to publicly rule anything out in order to maintain strategic ambiguity. Former Trump adviser Steve Bannon keeps pushing the idea of combining the bill with other populist measures that Trump campaigned on for his current term, including no tax on tips and overtime. And the fact that some congressional Republicans refuse to dismiss the idea reflects how the composition of the party has shifted in recent years.

But a hike on millionaires has always appeared to be a longshot, if not calculated political noise. It would be a de facto adoption of a policy that former Vice President Kamala Harris ran on, complete reversal of the tough negotiating stance around the topic that congressional Republicans took during the 2012 fiscal cliff, and it could give some flashbacks to the 2018 Democratic wave caused, in part, by the creation of the SALT cap, which did raise taxes on some wealthy constituents. 

House not eager to put carried interest in crosshairs

Though discussions remain fluid, Republicans do not appear eager to end the current treatment of carried interest, despite Trump’s inclusion of the provision on his list of tax policy priorities.

“It’s one of the items that Ways and Means is looking at but, you know, they’re really focused on pro-growth policies,” Scalise told Politico when asked about carried interest on April 29. “Keeping current rates where they are is the first place you start. Making sure that nobody has a tax increase.”

Johnson has also indicated he has little taste for taxing carried interest as ordinary income instead of capital gains, saying on the topic at a press conference that, “we’ve heard from interest groups around the country, and we want to do right by them.”

Republicans are going to be hard-pressed to create budgetary space through revenue-raisers and spending cuts to meet the demands of fiscal hawks, and possibly assuage bond markets. That makes it still possible the idea of a tax hike on the wealthy, including changing treatment of carried interest, could gain traction, though that currently appears unlikely.

OECD retaliation could be included by House

House Republican tax writers appear open to including legislation to retaliate against countries that adopt the Organisation for Economic Co-Operation and Development global minimum tax framework, already introduced in separate bills, in the text of their own mega-bill instructions.

“We want to send a message, a permanent message, that we want to protect the U.S. fisc,” Rep. Kevin Hern, R-Okla., told reporters on April 30. “I think that’s the best way to send that message," he added.

Bills from Ways and Means Chair Jason Smith, R-Mo. (H.R. 591), and Rep. Ron Estes, R-Kan. (H.R. 2423), would be the likely framework for language that could increase the federal government’s retaliatory and revenue collection options in the event that foreign countries impose the taxes outlined in the OECD framework on American companies.

Smith’s bill would allow the Treasury secretary to identify countries deemed to be discriminating against U.S. companies through taxation, and target increases of taxes against companies from those countries operating in the U.S., which would steadily grow over a several-year window if the foreign government did not drop the taxes deemed to be discriminatory. The Estes bill would increase the base-erosion and anti-abuse tax (BEAT) on foreign entities whose home country governments impose the undertaxed profits rule (UTPR) from Pillar 2 of the OECD agreement, or other extraterritorial taxes.

The legislative effort should be seen in the current context of Trump’s trade wars, as well as the OECD process that Trump withdrew the U.S. from in a day one executive order. During his first administration, Trump threatened the use of tariffs over digital services taxes proposed by several countries, which were put on pause as OECD negotiations took place. At least 28 countries have enacted legislation to institute at least portions of Pillar 2, though not all have adopted UTPR-compliant taxes.

U.S. multinational services companies, particularly companies that provide digital services, are seen as a potential sector for retaliation if a majority of the administration’s tariffs stay in place, or the country-by-country tariffs paused until July 9 go into effect. The legislation would grant the administration another retaliatory option alongside tariffs and Section 891, which allows for the doubling of tax rates on foreign companies in retaliation to discriminatory taxes at the discretion of the executive branch, has been threatened both during this administration and the first Trump term.

Whether the potential new taxes on foreign entities would meet the important standard of being more than “merely incidental” to the federal budget will be key criteria as to whether they can become law through the reconciliation process or not.

Trump administration wants tariffs to pay for tax breaks

The Trump administration continues to push tariffs as a way of paying for new tax breaks, meaning the duties, which hit their highest nominal rate since 1909, are not just a negotiating tactic with other countries. Trump continued to tie tariffs to his campaign promises of added tax breaks, suggesting a number of duties will stay in place long-term as a way to offset lost revenue for the federal government.

“When Tariffs cut in, many people’s Income Taxes will be substantially reduced, maybe even completely eliminated,” Trump posted on social media on April 27. “Focus will be on people making less than $200,000 a year,” he continued, calling tariffs a, “BONANZA FOR AMERICA!!!”

Treasury Secretary Scott Bessent again confirmed this dual reality during a White House press conference on April 29.

“I think the combination of both,” Bessent said when asked if tariffs were for negotiations or raising revenue. “We’re going to take in long-term tariff revenue.”

Bessent went further, emphasizing that the administration sees tariff revenues replacing lost federal revenue from new breaks Trump proposed to make tips and overtime pay tax-free, among other campaign proposals.

“What President Trump is referring to is the ability of tariff revenue to give income tax relief, and I think that there’s a very good chance we will see this in the upcoming tax bill,” Bessent said when asked about Trump’s repeated promises to use tariff revenue to replace traditional income taxes.

In addition to the personal income tax breaks ꟷ including also a proposed incentive to purchase domestic automobiles by making the loan interest on them deductible ꟷ Bessent floated an idea to provide full expensing for new factories in the U.S. This tracks with a campaign proposal to provide incentive to companies operating in the U.S., though Trump also wants to cut the corporate rate on domestic manufacturers to 15% from 21%. Both are expensive proposals in terms of lost federal revenue, which could be a constraint in the ability of Republicans to advance these policies within the deficit-conscious process of budget reconciliation.

Senate still working on own mega-bill version

While the House continues to hold some first-moved advantage in the process, Senate Republicans are working on a parallel track with their own budget blueprint, which allows for a much more generous calculation of extending Tax Cuts and Jobs Act provisions in terms of their effect on federal revenues.

The Senate parliamentarian has yet to make a ruling on the novel accounting shift in how extending tax cuts and major deductions, like the 199A qualified business income deduction, would fit into the parameters for the fast-track method Republicans plan to use to sidestep a potential filibuster in that chamber. Republicans have laid the groundwork for potentially overruling the nonpartisan staffer charged with interpreting how proposed legislation fits into established rules and laws governing Senate procedure, especially budget reconciliation, the fast-track process originally intended to help mitigate deficits and debt, but increasingly used to pass significant economic legislation along party lines.

Timing of legislative text remains to be seen. Senate Majority Leader John Thune, R-S.D., promised on April 28 that, “we’ve been working toward the text of that final bill for months, and drafting has only accelerated since passage of the budget resolution,” during remarks on the Senate floor.

Senate Finance Committee Chair Mike Crapo, R-Idaho, has said he plans to revive the expired more generous calculation of the Section 163(j) net interest deduction, Section 174 R&E expensing and 100% bonus depreciation, but must also balance approximately 200 policy proposals from colleagues, interests of House Republicans and the White House, and his own other priorities.

PCAOB would be eliminated in House mega-bill

The House Financial Services Committee advanced instructions that include the elimination of the Public Company Accounting Oversight Board as part of its contribution to the House Republican reconciliation package. The work of the government-created nonprofit, which oversees accounting firms, would be rolled into the Securities and Exchange Commission. It isn’t clear yet if the Senate will take a similar tack in its own version of the legislation.

It's not immediately clear how exactly how much revenue rolling the PCAOB up would generate, or savings it might provide, but the committee was expected to find at least $1 billion in deficit reduction for the federal government within the House Republican budget blueprint. The Committee for a Responsible Federal Budget, a nongovernmental fiscal hawk group, estimates that the Financial Services Committee’s portion of the Republican mega-bill would decrease the deficit by $5 billion over 10 years, though much of that may be through significantly lowering the funding cap the Consumer Financial Protection Bureau, which receives its operational financing through the Federal Reserve.

Finance Committee advances top Treasury tax nominee

The Senate Finance Committee reported favorably on the nomination of Ken Kies, a longtime fixture of the tax policy world, to be assistant secretary of Treasury for tax policy on April 29. The vote to advance Kies’s nomination was 14-13.

Democrats opposed Kies due in part to his longtime work as an influential lobbyist in Washington, as well as overall opposition to the Trump administration’s tax agenda. He is also former chief tax counsel for the House Ways and Means Committee and former chief of staff for the nonpartisan Joint Committee on Taxation. 

As of May 2, a date for Kies’s final confirmation vote before the entire Senate has not been set, but his confirmation will be a priority among remaining nominations, as it will allow him to play a more formal role for the administration in both negotiating and overseeing implementation of the massive tax policy package expected to pass this year.  

The committee also advanced the nomination of William Kimmitt to be under secretary of Commerce for international trade, a role that will play a major part in the Trump administration’s substantial trade agenda. 

‘Skinny’ presidential budget offers little tax detail

A far slimmer on detail presidential budget request for federal fiscal year 2026, released on May 2, offered little in the way of tax policy requests from Congress. But the discretionary spending request was not, as of writing, accompanied by the usual detailed revenue proposals that often go along with a presidential budget request (Treasury’s so-called “Green Book”).

The budget does request another $2.5 billion cut to IRS funding, along with language recommending, “The elimination of certain complex tax credits and technology improvements would increase IRS efficiency. The reduction would protect functions in Taxpayer Services.”

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